Why will mansion owners get over £20k gift in energy bill reductions when typical households get around £1.5k?

[Malthus123]

I am sorry but I just don't understand,

I've done some maths on it (happy to share if anyone wants) and the 2-year govt. energy price guarantee could result in around £12bn going to the 2.8m UK households earning over £91k per year. £4bn will go to the top 1% of energy users, this will include mansions with heated pools!

My energy bill is going through the roof, over 2m people had to use foodbanks last year. But at the same time, the wealthiest in the UK are getting unnecessary government-funded energy bill subsidies to top up their bank accounts???

£12bn could give £4,200 to each of the poorest 2.8m households, feeding kids and heating homes.

Am I living in some sort of dystopian fantasy world? How do we stop this!!

Why will mansion owners get over £20k gift in energy bill reductions when typical households get around £1.5k

The simple answer is because we have a Tory government.

We are high users of electricity - large house with a ground source heat pump and other ancillary buildings. We use about 45k kWh per year. As
high users we tend to go for long fixes so we’re currently on a three year fix from Aug 22 with electricity at 17.5p per kWh. I think you’ll find a lot of high users also take this approach and so Liz’s price cap is irrelevant to us.

The main issue I have with your calculations and assumptions is that at the upper end, you have not extended your wealth indicator. A household income of 91K in London and the South East is not "wealthy" in your terms. The correlation with that income and energy use does not necessarily apply. The majority will not be living in huge houses with high energy use. In order to refine your data, you really need to look beyond this figure, to the super wealthy, who absolutely do not need the subsidy.

I have found this (very old) report, which details (I have only skimmed), how some low income households are also the highest users. This group seems to be mostly retired in, yes, large rural homes without access to gas.

www.ofgem.gov.uk/sites/default/files/docs/2011/03/high-use-low-income-energy-consumers_final-report-nov-10_0.pdf

Yes, I know that on MN anyone claiming that an income over £50,000 might everyday be modest gets a kicking, but there will be a lot of three or four income median wage households in that top bracket who are living in a big house and using a lot of energy simply because there are a lot of them: either young adults living with parents or people living in house shares..

Many people with larger homes in rural areas will be “off grid” and will be getting a very generous (ha ha) £100 towards their heating costs. My LPG cost has doubled per litre even though it should not be affected by natural gas prices.

Yep. This is true. Also independent youngsters starting out in the world. DD and her flat mate, in London, household income above 90k. Living in a top floor Edwardian 2 bedroom flat, huge rent, and on pre-pay meters. They can't get them changed.

There are flaws in taking a position and then attempting to use maths to prove it... ;) headline quotes like the one above:

Why will mansion owners get over £20k gift in energy bill reductions when typical households get around £1.5k
The simple answer is because we have a Tory government.

are of course nonsense - the reality is that no government can stand by and let people freeze to death through a winter, so something had to be done... the simpler it is as a concept - some will get money they might not need - the more complex it is the more chance others will fall through a gap somewhere... there is no right answer and yes it might mean some wealthy people get money they don't need, but those same wealthy people have been paying a higher green tax subsidy / more vat / more income tax / etc. etc. - it does work both ways...

So even with a Labour government (who seem to have no policies at all other than saying that the Tories are wrong!) there would be inequity somewhere, it happens with all solutions...

Let's be thankful that we have a PM who is prepared to stand up and do the right thing and make sure that the normal person can actually afford heating - even at the cost of her unpopularity - if Tories were only interested in the rich they would have done nothing, the rich can afford the higher bills - so this entire process is about those who are not rich...

but let's not allow reality to get in the way of chips on shoulders and polemic political discussions ;)

Would the money go to tarquin's trust fund or is it going directly to the energy firms?
I am also super interested in the profit for these energy firms next year. We saw small energy providers drop out of business, windfall profits for the big ones, and now charging the earth for energy.

the simpler it is as a concept - some will get money they might not need - the more complex it is the more chance others will fall through a gap somewhere...

I agree. There's inevitably a trade-off in time and money taken to implement between broad-brush subsidies and more targeted assistance.

The money goes to the energy suppliers: the intermediaries who buy energy on the world markets and then resell it to us. They will be paid a subsidy per unit which will enable them to buy at market rates and resell to us at the capped price while making a small percentage profit: they won't be raking it in, but they'll be derisked.

Tarquin will still be paying to heat his swimming pool, and it will be more expensive than it was before unless he's got an excellent personal solar set up, but it will cost him far less than it would have done without the government subsidy.

The higher market rates go, and the more units we all use, the more the subsidy will cost the Treasury.

When you say "the small providers go bust and the big ones make windfall profits" you're confusing two different sorts of business. The business of buying energy and selling it to consumers has been disastrous in the last two years, whether you're big or small, unless you've hedged your supply very carefully. The business of producing energy in the first place and then selling it to intermediaries has been staggeringly profitable. Conglomerates which have fingers in both pies have done OK.

@red4321 though surely it is a pretty simply concept to limit the subsidy to the first few thousand units. With a more generous cap for those who don't have grid gas? Every one would get subsidy, including some wealthy homes that dont need it, but it would limit the waste substantially. High cost for higher use would drive investment in energy saving and solar. Cutting carbon and creating jobs.

@akkakk when you say "some will get some money the don't need" we are talking about £12bn in bill subsidy over 2 years going to households earning over £91k. £12bn is more than 'some'. That is about 1/10 of the entire annual budget for the NHS. This would be more than enough to ensure that the 2m people forced to go to food banks last year had enough money to buy their own food

@BigWoollyJumpers yes, the report shows that there were low income high energy use households, though the definition of 'high energy use' in the report was not actually very high. The highest energy use category was the top 10% of energyusers. The top 1% of energy users will get £4bn subsidy, Id bet anything that this group contains almost no poorer households. The report also clearly shows that the vast majority of higher energy use households are higher income.

Wow, 45,000kWh per year with a heat pump, that is off the scale. If your heat pump was a typical efficieny, you would be using 135,000 KWh of heat a year. An average house uses more like 12,000. Your property must be very big indeed.

@FreddyHG yes Freddy that sounds in the right ball park. Especially if that was all electrcity as the article mentions 'powering' his house, a bit less if it included more gas use.

I think it would be helpful to put some of the subsidies towards helping people insulate their home, coupled with making it easier to do so. All the high energy users I know are in listed homes and would love to spend the money on things like double glazing and solar panels rather than extra energy but aren't allowed to. If the money comes from the public purse I'd much rather it at least had a positive impact on the environment we all have to live in, not least because climate change tends to hit the poorest hardest.

@Malthus123 it is quite big but we’re also rural and it’s an old house, so not as well insulated as it needs to be to get the most effective use from the heat pump. Still a lot cheaper and warmer than when we were trying to heat it all with oil fired heating. It’s a 30kw pump so it’s reasonably heavy duty.

If you think about it though, this £1000 ‘saving’ is all imaginary anyway. Liz Truss is trying to make herself sound amazing with this and people have already forgotten that the price cap was £1200 a year ago and £1971 about 6 months ago. No-one has ever had the £2500 price cap. If we want to be real pedants and use the OPs spreadsheet then we should be using the £1971 as a starting point because that’s what it is now.

Is it the case that it would cost us more to ‘means test’ the subsidy than it will to just give it to everyone?

What would be the cost of giving every household earning £100k or less, say £2000 into their energy account this year and next, rather than capping the cap for everyone

Thanks, I made a lifetime career out of pedantry :). This is real money borrowed by the govt to pay peoples actual energy bills. The subsidy calculation needs to be based on where energy bills would be without the govt paying off a big chunk.

Please, OP, send your data and graphs to the Guardian and/or the Mirror. I doubt the other papers would be interested, unfortunately.

Quite. And if those of us who are fit and healthy and could manage with less power would use less, then that actually brings the price down for everyone, as it reduces demand. We're trying to cut our usage as much as we can for that reason as well as the cost of it. And we're insulating as much as possible in an older house, as and when we do other work and get the access to do it.

@BlueMongoose I have done so :)

@BorgQueen it would cost £50bn to give £2k each to the 90% of UK households that earn under £91k per year. So half as expensive as the current approach.